ECONOMIC CRISES IN PAKISTAN

INTRODUCTION:
Economy
The word economy comes from the GREEK word oikonomos ,
which means one who manages a household.
Economics is the study of how society manages its scarce
(limited) resources.

OR
Economy , is concerned with how individuals , institutions , and
society make an optimal (best) choices under the condition of
scarcity (the limited nature of resources).

Branches Of Economy
Microeconomics (The study of how households and firms
make decisions and how they interact in markets).
Macroeconomics (The study of economy at wide level,
including inflation , unemployment and economic growth of a
country).

How economy of a country can be rated?

Economy of every country rated into GDP (Gross Domestic
Product).
GDP measures the market value of all final goods and services
produced within a country in a given period of time (usually one
year).

Factors on which economy of a country depends

The growth of average income.
The fraction of population that cannot find work.
The rate at which prices are rising.

Economic Crises

When a society fails to maintain equilibrium in its supply and

demand capacity then the economic crises of a country start.

BACKGROUND OF ECONOMY OF PAKISTAN:

Economic aspect is the most important facet of the human
activity because mans progress and happiness depends on his
sound and stable economic condition. But for the LDCs, Less
Developed Countries, it is very difficult to come out of economic
recession and backwardness as they are the victim of their own
poverty. Pakistan being one of the LDCs could not overcome its
poverty. The impoverished masses became a formidable hurdle in
the way of economic progress. Pakistan fell a victim to the vicious
circle of poverty which is caused by low productivity, deficiency in
per capita income , market imperfections , economic
backwardness and under development.
After independence Pakistan accounts 26 % of GDP , provides
livelihood to a majority of the people. Agriculture is dominated by
five crops ,wheat, rice , sugarcane ,cotton and jute. Which
together accounts 60% of the total value added in the sector or
18% of GDP. At the same time manufacturing is the second
largest sector of the national economy accounts 20% 0f GDP.
Rapid growth has been recorded also by banking and insurance
increasing its share of GDP from 36% to 38% during the period of
1978-1982 starting from the 31% in 1960. Inflation gained its
momentum in the early 1970s triggered off by the oil crises and
also due to the separation of East Pakistan ( Bangladesh).
Pakistans fiscal performance shows that compared 1983-84 ,
increase in deficit of percentage of GNP widened from 5.8% to
6.2% in 1984-85. The stock of domestic debt over the period
1990-1991 to 1995-1996 has more than doubled. The current
account deficit during the five years ended june 1996 averaged
4.5% of gross domestic product. October 1999 , after the takeover
of army the economic situation of the country has been in the
state of uncertainty. The real GDP growth had fallen to the lowest
in our history i.e 1.8% in 2000-2001. The major contribution from
the demand side came from the agriculture side, which grew

twice as fast as the nominal GDP for two successive years (20022003) to (2003-2004) because of higher prices of agriculture
produce. The year ( 2004-2005 ) the macroeconomic stability,
achieved during post 1999 , appears to be in the state of
uncertainty. Pakistan has attracted $8.4 billion foreign investment
in the year 2006 2007. As a result of political and economic
instability, the Pakistani rupee has depreciated more than 40%
since 2007. The government agreed to an International Monetary
Fund Standby Arrangement in November 2008 in response to a
balance of payments crisis. After a small current account surplus
in fiscal year 2011 (jully2010/june2011), Pakistan account turned
to deficit in the following two years , spurred by higher prices for
imported oil and lower prices for exported cotton. Pakistan
remains stuck in a low income , low growth trap , with growth
averaging about 3.5% per year from 2008-2013. Official
unemployment was 6.6% of Pakistan in 2013.

ECONOMIC PLANING IN PAKISTAN:

Pakistan economic planning is based upon five years. After each
five year this economic planning is reconsidered on different facts
and figures. Interest rate, employment rate and money supply are
some dramatic factors in economic planning.
First five year plan (1955-1960)
Second five year plan (1960-1965)
Third five year plan (1965-1970)
Fourth five year plan (1970-1975)
Fifth five year plan (1978-1983)
Sixth five year plan (1983-1988)
Seventh five year plan (1988-1993)
The seventh five year plan had been formulated within the
context of the perspective plan which will cover the period from
1988-2003.

Finding in analysis:

Current situation of Pakistan economy

The current government in Pakistan made economic growth a
central pillar of its agenda. Cabinet ministers, led by the
honourable finance minister, argue that the economy is on an
uptrend, foreign exchange reserves are recovering, investment is
occurring, and that the future is bright for Pakistan. A closer look
reveals that the picture is not as rosy. Foreign exchange reserves
have improved not because of export growth, but due to reengagement with the IMF and the sale of external debt
instruments. Meanwhile, domestic liabilities and debt of the
government hit record highs and have grown by 13 per cent on a
yearly basis. According to the State Bank of Pakistan (SBP), the
reduction in fiscal deficit to 5.5 per cent of the GDP was mainly
due to one-off factors. Furthermore, the government has not paid
off the circular debt this year, which now stands at more than
Rs200 billion. Exports, which stood at $24.8 billion in 2013, grew
by only $400 million to $25.2 billion in 2014. The annual report of
the SBP report highlights this problem, arguing that Pakistan
must increase its hard currency earnings and that Pakistans
ability to borrow from abroad could easily become an FX
crisis.
Growth in value-added exports cannot occur without a welleducated labour force. Pakistan has the worlds second-largest
number of children out of school, ranking only behind Nigeria. In
an age where developing countries have taken advantage of their
demographic dividend, Pakistan is turning a potential dividend
into a ticking time bomb. In the next decade, these children will
want jobs and unable to be productive, they will become a
societal nightmare. Instead of having decent standards of living,
they will find themselves unable to perform productive tasks in a
globalised world where basic technical skills will be key.
Investment in our education system will not only give these

children a better future, but it will help Pakistan drive economic

growth and boost output of value-added goods and services. A
technically sound workforce will not only generate growth in
technologically-advanced industries, but it will allow the country
to raise revenues to further invest in social and human
development of the country. One sees little to no effort on
curriculum reform today and we are continuing to focus on rotelearning and other ineffective means of education, which puts our
economys human resources at a severe disadvantage to the rest
of the world.
Growth in value-added exports cannot occur without a welleducated labour force. Pakistan has the worlds second-largest
number of children out of school, ranking only behind Nigeria. In
an age where developing countries have taken advantage of their
demographic dividend, Pakistan is turning a potential dividend
into a ticking time bomb. In the next decade, these children will
want jobs and unable to be productive, they will become a
societal nightmare. Instead of having decent standards of living,
they will find themselves unable to perform productive tasks in a
globalized world where basic technical skills will be key.
Investment in our education system will not only give these
children a better future, but it will help Pakistan drive economic
growth and boost output of value-added goods and services. A
technically sound workforce will not only generate growth in
technologically-advanced industries, but it will allow the country
to raise revenues to further invest in social and human
development of the country. One sees little to no effort on
curriculum reform today and we are continuing to focus on rotelearning and other ineffective means of education, which puts our
economys human resources at a severe disadvantage to the rest
of the world.
Growth in value-added exports cannot occur without a welleducated labour force. Pakistan has the worlds second-largest
number of children out of school, ranking only behind Nigeria. In
an age where developing countries have taken advantage of their
demographic dividend, Pakistan is turning a potential dividend
into a ticking time bomb. In the next decade, these children will
want jobs and unable to be productive, they will become a
societal nightmare. Instead of having decent standards of living,

they will find themselves unable to perform productive tasks in a

globalized world where basic technical skills will be key.
Investment in our education system will not only give these
children a better future, but it will help Pakistan drive economic
growth and boost output of value-added goods and services. A
technically sound workforce will not only generate growth in
technologically-advanced industries, but it will allow the country
to raise revenues to further invest in social and human
development of the country. One sees little to no effort on
curriculum reform today and we are continuing to focus on rotelearning and other ineffective means of education, which puts our
economys human resources at a severe disadvantage to the rest
of the world.
A report is published by the department of economics and social
affairs (DESA) of the United Nations. Due to the precarious
security situation in the country, and low fixed investment, the
report said, macroeconomic fundamentals remain fragile in
Pakistan, in spite of the GDP rebounding to an estimated 4.2% in
2014 after robust private and public consumption.

CAUSES OF ECONOMIC CRISES IN CURRENT

SITUATION:
LOADSHEDDING /POWER SHORTAGE
One of the major cause of economic crises in Pakistan in current
situation is the load shedding/ power shortage in Pakistan. Our
textile industry is almost failed to get the require objectives due
to the power shortage.
POPULATION GROWTH
Rapid population growth is a one of the cause of economic crises
in Pakistan.

POLITICAL AND ADMINISTRATIVE HURDLES

One of the major cause of economic crises in Pakistan is political
and administrative hurdle. Because due to the distability of
political situation in Pakistan, no one wants to invest in this
country.
INADIQUATE SYSTEM OF TRANSPORTATION
Inadequate system of transportation is one of the cause of
economic crises. And it mainly born hurdles in the agranian
economy .Because in villages it is very difficult to transport the
crops from one place to the other.
LACK OF UTILIZATION OF MANPOWER
One of the economic cause of economic crises in Pakistan is the
lack of utilization of manpower. In rural areas 16% labor is found
in which 15% are paid workers. While the rest of them are selfemployment. The government doesnt promote the field of
agriculture which creates poverty , inflation and unemployment in
Pakistan. Because 70% people of Pakistan related to the
agriculture directly or indirectly.
BLACK MAKETING
Black marketing is also one of the reason of economic crises in
country. Because Karachi as a major and largest trading city of
Pakistan their is no one who can encouraged or convinced any
one to invest in this country only due to the day by day
increasment of black marketing in Pakistan.
LACK OF CAPITAL
Pakistan economy faces a serious issue of lack of capital. Because
investors are not ready to invest because of serious security
threat and due to political instability of political situation in
Pakistan.
LACK OF TECHNICAL KNOW- HOW
Uneducated and untrained people are working in the industries
and in the field of agriculture. Even they doesnt know the basic
information of the field in they worked. They doesnt know how to
use the modern technology.
BIASED POLICES OF GOVERNMENT

Government makes biased policy in the sense that if the

government has its shares in industrial sector then it promotes
the industrial sector and neglect the other sectors of the
economy.
SCARCITY OF FOREIGN EXCHANGE
Foreign exchange is earned through extensive exports. Pakistan is
foreign trade oriented country. It has to concentrate on foreign
exchange earning for the economic development .we are also the
victims of scarcity of foreign exchange.
NON-PRODUCTIVE EXPENSES
Pakistans economy has suffered badly due to the heavy nonproductive expenses. These expenses make an unhealthy impact
on the economic development of the country.
WATER CRISES
Pakistan suffers serious water crises which creates bad impact on
the economy of Pakistan. Because Pakistan has agranian
economy and for the development of agranian economy water
logging system should be well-established.
NATURAL DISASTERS
Natural disasters are also very badly effects the economy of
Pakistan. Because government of Pakistan doesnt take any
measurement to secure from the harms of the natural disasters.
Thats why our economy also suffers from natural disasters due to
unsufficient measurements.

DISSCUSION:
This scribe arranged the discussion on very small scale in order to
give some useful suggestions to solve the economic problems and
in order to contribute as a active citizen of Pakistan.
PAKISTAN APPROACHES TO IMF
When the scriber ask the discussants about why Pakistan
approaches to IMF?
INTERNATIONAL MONITARY FUND